[Federal Register Volume 75, Number 201 (Tuesday, October 19, 2010)]
[Notices]
[Pages 64370-64371]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26245]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63083; File No. SR-NASDAQ-2010-127]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify NASDAQ's Order Routing Rule

October 13, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on October 1, 2010, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing this proposed rule change to amend Rule 4758 
to modify the SAVE routing option to reflect the expected launch of 
NASDAQ OMX PSX (``PSX'') as a new venue for trading NMS stocks on 
October 8, 2010. NASDAQ proposes to implement the proposed rule change 
on October 8, 2010, or, if the Commission does not waive the 30-day 
waiting period specified in Rule 19b-4(f)(6)(iii),\3\ on a date that is 
30 days after the date of this filing. The text of the proposed rule 
change is available at http://nasdaq.cchwallstreet.com/, at the 
Exchange's principal office, and at the Commission's Public Reference 
Room.
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    \3\ 17 CFR 240.19b-4(f)(6)(iii).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASDAQ included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below, and is set forth in Sections A, B, and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ is amending Rule 4758, which describes its order routing 
processes, to modify the existing SAVE routing option. Under the SAVE 
routing option, a market participant may specify that an order will 
either (i) route to NASDAQ OMX BX (``BX''), check the NASDAQ book, and 
then route to other venues on the SAVE System routing table, or (ii) 
check the NASDAQ book first and then route to destinations on the SAVE 
System routing table.\4\ Under the second option, the applicable 
routing table includes BX, and as is the case with all market 
destinations, the placement of BX on the routing table depends on 
NASDAQ's ongoing assessments of factors such as latency, fill rates, 
reliability, and cost. If shares remain un-executed after routing, they 
are posted to the NASDAQ book and do not route out again. All routing 
complies with the requirements of Rule 611 of Regulation NMS. Under 
Rule 7018, NASDAQ passes through, without modification, applicable BX 
fees or rebates. In the case of BX, this means that NASDAQ passes 
through the $0.0001 per share executed credit paid by BX to market 
participants when accessing liquidity. Thus, the routing strategy 
provides market participants with the option of routing to a venue with 
a negative execution cost before accessing liquidity on NASDAQ and 
other venues. Market participants that wish to access NASDAQ before 
routing to BX may also use the SAVE strategy, and will receive the same 
pricing as those that opt to route to BX first, subject to the fact 
that they are likely to have more shares executed on NASDAQ, at a 
higher cost, than those that use SAVE to route to BX first.
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    \4\ Under Rule 4758, the ``System routing table'' is defined as 
the proprietary process for determining the specific trading venues 
to which the NASDAQ System routes orders and the order in which it 
routes them. The definition reflects the fact that NASDAQ, like 
other trading venues, maintains different routing tables for 
different routing options and modifies them on a regular basis to 
reflect assessments about the destination markets. Such assessments 
consider factors such as a destination's latency, fill rates, 
reliability, and cost. Accordingly, the definition specifies that 
NASDAQ reserves the right to maintain a different routing table for 
different routing options and to modify routing tables at any time 
without notice. At present, all System routing tables include NASDAQ 
OMX BX (``BX''), and it is expected that they will be modified also 
to include PSX. Thus, all routed orders have the opportunity to 
route to this venue, with the exception of DOT orders routed 
directly to the NYSE or NYSE Amex opening or closing processes and 
directed orders that are directed to route to venues other than BX.
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    NASDAQ is amending the SAVE strategy to provide that in 
circumstances where a market participants [sic] opts to route to BX 
before checking the NASDAQ book, the order will also route to PSX after 
BX but before checking NASDAQ. PSX will be charging $0.0013 per share 
executed to access liquidity, a higher rate than BX, but half the fee 
charged by NASDAQ itself to access liquidity. Moreover, NASDAQ recently 
amended Rule 7018 to provide that orders routed to PSX using the SAVE 
strategy will receive a pass-through of applicable charges. 
Accordingly, NASDAQ believes that it is appropriate to amend the 
strategy, to give market participants the option of routing to these 
two low cost venues before accessing NASDAQ. As is currently the case, 
however, members will also have option of checking NASDAQ first using 
the strategy, in which case they will still receive pass through 
pricing if their orders are subsequently routed to BX or PSX.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with 
Sections 6(b)(5) of the Act,\6\ in particular, in that the proposal is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. The proposed 
change to modify the SAVE routing will provide market participants with 
greater flexibility in routing orders to BX and PSX, as low cost 
trading venues.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).

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[[Page 64371]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
Nasdaq has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \9\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6) permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. NASDAQ requests that 
the Commission waive the 30-day operative delay because it currently 
has the technological changes ready to support the proposed rule 
change, and believes that the benefits of providing members with an 
additional option for routing to a new low cost trading venue should 
not be delayed. The Commission believes that waiving the 30-day 
operative delay \10\ is consistent with the protection of investors and 
the public interest and designates the proposal operative upon filing.
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    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NASDAQ-2010-127 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2010-127. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission,\11\ all subsequent 
amendments, all written statements with respect to the proposed rule 
change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for Web site viewing and printing in the Commission's Public 
Reference Room, on official business days between the hours of 10 a.m. 
and 3 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2010-127 and should 
be submitted on or before November 9, 2010.
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    \11\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov/rules/sro.shtml.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-26245 Filed 10-18-10; 8:45 am]
BILLING CODE 8011-01-P